tv Squawk Box CNBC January 15, 2013 6:00am-9:00am EST
good morning. today's top stories, dell reportedly holding talks to go private. jpmorgan has ordered to fix lapses in its risk management and fed chairman bernanke has a warning for congress. raise the debt ceiling or put the u.s. economy st. at risk. it's tuesday, january 15th, 2013 and "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we've been watching the u.s. equity futures and at least at this point you can see they do look like they're indicated to open a little lower. right now, dow futures down by about 16 points below fair value. the s&p futures are about 2
points below fair value. we have some different nebs going on at the top of the screen than we do on that fair value board. we'll check on that, as well. dell is said to be in talks with private companies in reports of a possible guyout. the journal says jpmorgan is involved in the negotiations. dell shares have been soaring near an eight-month high on first word of this news yesterday. you can see up about close to 2% to the premarket sales. 64 is the last dip. in other technology news, facebook is holing a press conference today. no word on what the big announcement will be. you've heard a lot of analyst saying it could have something to do with a morrow bust search feature. also, banking regulators are ordering jpmorgan to tight.risk controls after the bank's multibillion dollar lending trading losses.
the orders from the fed and the office of the comptroller, not named individuals have been called and they do not levy any monetary improvements on the bank. including take risk outcomes into account when considering top executives pay packages. andrew, i'll send it over to you. >> thanks, becky. fed chairman ben bernanke is calling on congress to raise the debt ceiling to avoid a officially disastrous debt default. take a look at what he had to say. >> raising the debt ceiling, which congress has to do periodically gives the government the ability to pay its existing bills. it doesn't create new spending or new government. so simply paying the -- not the most effective way to improve your credit rating. >> bernanke was speaking at the university of michigan.
he gave no clear hints on what the fed could curve its aggressive bond purchases. on the economic agenda today, we had a number of key data points. coming at 8:30 eastern, we're getting retail sales, the producer price index. at 10:00, we have business inventories the. a lot of different numbers to roll through and assess this morning. >> and we have a new poll of small businesses finds a large majority of owners believe washington has become more hostile towards free enterprise in recent years. stop the presses. the survey was conducted on behalf of the job creator's alliance. a quarter of the respondents volunteered taxes as the most important issues facing american small businesses and that's double the response for any other issue. the next two were government and relagz. in other news, walmart will announce a plan to hire every veteran that applies for a job.
the only requirement? the vets need to have retired from the military within the last year. the house will begin to debate on a $51 billion plan for superstorm sandy victims. more than 90 amendments will be filed by friday. earlier this month, lawmakers approved $9.7 billion to help pay flood insurance claims from the storm. the senate is expected to pick up whatever legislation the house approves, but things are getting testy at this point. you are talking about over 75 days i believe at some point since the storm actually came through. governor chris christie of new jersey has been making harsh comments about how you will not expect in the past of seeing any of the representatives from this area of the country who were voting down bill toes help aide flood and victims in iowa.
he doesn't want to see breaking down into you scratch my back, i'll scratch yours in the future. in other news and outside the world of business, lance armstrong sitting down with oprah winfrey to confess to using performance enhancing drugs during his cycling career. the information is set to forecast on thursday. the "new york times" is reporting that he's planning to testify against several powerful people in cycling who knew about his doping and several people to justify it. this involves some others. i have a column in today's "new york times" about mr. wizell's role. >> i didn't realize how involved he had been. >> he founded the team. big banker out in san francisco.
>> he used to ride out in the car. >> with not the postal service team. >>el with, he founded what became the postal service team, but it was called montgomery sports and then montgomery bail and them ultimately the u.s. postal service and later the discovery channel. but he was the owner throughout and the man behind all of this is a good friend of lance's and did stay in the car and would be with them throughout this whole thing. and there was always questions, what did he do? was he paying for this? >> he's never come out and said anything publicly about one of that. in conjunction with that, she claimed that nike was part of that. nike came out and claimed they
were not a part of that. >> was it everywhere in cycling? did all the teams do it? armstrong seems to be saying that it's rife in cycling and in all sports and he's being singled out. i don't know whether other cycling teams were presented -- you know, you're the best doping -- if everybody is doping and you win, then -- you're still the bed? >> i don't know. belatently coming on to tv and doing press conferences. >> he testified. >> but the way he -- >> seven years ago almost exactly. >> anybody. >> cbs, "60 minutes" demanding an apology and that pius, self-righteous -- >> and the lible case he brought against london, they settled the case for $1.5 million and now
they are suing him because they want their money back. and these poor time mates, you don't know al of them individually. and they were just buried by with him. you know, i don't know. >> he might underoath. >> karma is a [ expletive ]. >> you can say that on cable, right? >> i just did, yeah. i don't know. he says there's only one person who can rehabilitate my image and that's me. i just don't thinkite -- it's going to be tough. maybe it's me. >> there's several cases against him now. >> why should he have $100 million based on, you know, a role model for all these sponsors that now they know they bought damaged goods. >> well, i can't remember -- >> i wouldn't feel positive any more. i would feel tainted.
>> do you remember the nike ad he had, this is my body, i can push it, study it, tweak it. everybody wants to know what i'm on. what am i on? i'm on my bike six hour a day. >> i think we showed that commercial on our show earlier this year. in our news, alibaba's founder is going to give up the ceo title but will remain charm. i talked to jack ma last night. he was one of the more interesting conversations i had in a long time with now could be chairman of a company. he said i'm 48 years old. he said i'm too old to run this company, but the younger people understand the internet, they understand mobile. he's not an engineer. he's a school teach. so when you understand his past experience -- he said when i was
35, i had all this yrg, i had fresh thinking. so now he says he's 48 and he wants to pass on to a new generation. >> so you're just sitting around and your phone can ring at any time and your wife can pick it up and say hello and -- >> andrew, it's jack ma. i mean, that's -- >> that's kind of how we roll at the house. >> does that happen to you? >> not from jack ma. >> i just think that's weird. where was he calling from? >> i think it was his cell phone in china. plus 83 or plus 8-0 number. >> dad, it's just ma from china. it seems weird to me. is that your life? it is, isn't it? >> somebody called earlier to say that he would be calling. >> so it wasn't totally unexpected. >> about two minutes beforehand, are you going to be awake. >> and you weren't awake, were
you? >> i was not really going to be awake, but my plan wasn't to be awake. i was working on the lance arm strong thing. >> they called you two minutes earlier, are you going to be awake to take a call in a minute? well, i am now. >> what time was it? >> late. >> 11:00? >> yeah. >> well, you're so half asleep all the time. i hope it's worth it. you did get that story. okay. >> thank you for staying up late so we don't have to. we appreciate it. >> how about market news? i think we should avoid -- >> we have been watching the futures and they are down this morning. dow futures down, nasdaq weaker, too. in europe this morning, take a look. you will see at least at this hour that things are mixed. not much activity on any of these markets, either. overnight in asia, if you want to take a look right now, you'll see the hang seng is down 31 moints. but you saw gains again after
the massive gains we saw earlier in the week. you can see the nikkei closed up by about .7%. oil price these morning, at this point are down 11 cents. 9401. the ten-year note is yielding 1.829%. the dollar right now is up against the euro. again, another gain which is 1.3348. this morning, it's down against the yen. and gold prices this morning are up by about $11, $1680.70 an ounce. and it's time now for the global markets report. kelly evans is standing by in london. and it's more poofy hair today. you didn't walk through the fog on the way to work, right? oh, it's a wig, it says. it says it's a wig behind you where it says minus .44% right now. >> or, does it? yes, that's right. there are signals coming through this every day just to see if
people are paying attention. >> so weird. wig. >> yes. the polish board here is in the red, joe. it is not a wig it takes that on from time to time. we have seen a mixed picture. we have seen a weaker picture as the trading session has gotten under way. i want to point out the xetra dax is down .1%. our underperformer along with the peripheries is down about .3%, as well. after german gdp figures, europe's strongest, biggest economy came in surprisingly weak fourlt fort quarter. that's about a 2% annualized pace. so a pretty steep decline there. ever. and potentially not a risk off attitude this morning. take a look at the bond wall. you'll see the skittishness. prices are now rising for italy and spain for the most part. earlier in the session, we saw
the spanish ten-year well above 5%. now it's coming back a little bit. 4.988%. so, again, a mixed bag. italy doing okay. holding in there at 4.14%. you saw, by the way, that 15-year syndicated bond issue for italy going off reasonably well. raising about 6 billion euros and paying about 30 basis points above its government debt levels. look at forex. the euro/dollar in particular, no matter what happens here, there's no one that can plead. take a look back, 1.4348. it's giving back about .25%. interestingly enough, the break-up fears are coming back in the last couple of days. that itself was crating headaches. as some of these major economies head into recession, you can understand the concern coming to the fore. also today, politics is back in place.
berlusconi, yes, berlusconi is closing the gap on some of his rivals as the italian elections proemp at the end of next month. that has people at a bit of a curb yugs attitude. if nothing else, italy may not have a coalition government to come history. after the successive run, we're lot offing. >> kelly evans, that you can for that. wig. where is wig exactly? >> warsaw. >> warsaw. if they all of a sudden just splashed wig here, i would resemble that remark. >> people said to take notice. >> they would. i could sue whoever did that. >> i'm not only hair club president. i'm the president. >> that was cy. great guy. >> have we had him on? >> we have had him on. i know him obviously personally
as a client. >> coming up, why it might be difficult to find tylenol in your local cvs. plus, kevin ferry will join us from the futures pit. but first, a stock to watch this morning. the revenue results are topping the secretes and the homeowner says it sees strong possibility these year. we'll wa much that stock in premarket action. it is up this morning. ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪
welcome back. u.s. equity futures off today, down about 21 points. not much happened yesterday. we did finish higher, but off the best levels of the session, up about 18 or so. there's what's going on in the broader averages. you can see that all negative arrows, but mine are making headlines. it could be hard to find tylenol at your local cvs store this flu season because cvs has changed how it stocks stores in the wake of manufacturing problems with tylenol j&j. it's changed the stocking of tylenol to eliminate independent spots on shelves where the medication would have been. the move by the drugstore giant could be a sign of the difficulty j&j faces as it try toes fix those quality control problems that have been rampant in recent years.
and it tries to be build its tylenol business. >> it's just cvs is the problem? i guess they're the only ones who are moving their stock is the way they fill up the shelves as a result? >> yeah. >> my seidel joins us from the weather champ. mike, it's good to see you again this morning. >> good morning, becky and joe. here we go in the southeast where we've had a good rain for the last day or so. we are more soaking rain north of atlanta. could be slowdowns t airport. now, the northern fringe, there could be a little sleet, a little freezing rain. we had that around memphis and nashville. not a lot of anything, but it doesn't take a lot to cause problems. meanwhile, the temperatures continue today into florida. atlanta bounces back. little rock watch out for morning slipperiness on the elevated surfaces. and we're keeping an eye on dallas for the rush hour and sleep pellets. a typically cold day in the midwest today. chicago will top out at 3 2,
which is about right where you should be. we're back to average. a clipper system will scoot by to the north. and then we get to the northeast where the rain has backed off in boston and mostly around new york city it's to the south, down towards the mason dixon line. but tonight, that moisture will ride up the coast into the cold air. first, we get a nice day today around boston and new york city. so about average. look what happens. moisture returns up the coast. we've got cold air in there, becky, and snowfall in the forecast. again, the big cities don't get a whole lot, but the interior gets maybe as much as 6 everyone else. joe, you're familiar with boston. so far, boston has had four inches of snow. wooster and inland have had 20 inches of snow this season. it's a little too warm at the coast. >> yeah. we get more -- you didn't even know that, the other day, andrew didn't know there had been any snow and there was still snow on any ground out where i live. and you were like, there's been
no snow. it is. in the city, it doesn't seem to do it. thank you. appreciate it. >> sure, joe. the biggest names in retail were gathered in manhattan last night at the annual ceo summit. courtney reagan was in attendance. >> that's right, andrew. over 100 ceo ons were gathered last night. topics of discussion rage from digital and online innovation to creating value and how the unrest in washington is impacting confidence. i spoke to the evening's panelists ahead of the event and asked how they thought the recent increase in taxes will lead to discretionary spending? >> we will be watching that have been we have been closely. the change just happened. we have our finger on that pulse, for sure. >> if our good friends from washington have another one of these silly gun fights in the next couple of months, what is that going to do to our confidence, to our trust, to our faith in, you know, the whole
system? my sense is the first couple of months could be skittish. >> the bottom line is that increasingly, people are more discriminating, more focused on getting value for the money and certainly to the extent they have a noticeable impact on their spending. that's only going to increase. >> following the panel, we spoke to other ceos in attendance who discussed using these opportunities and capitalize on it. many says consumers are willing to spend when they perceive value. at the heart of it all is you need product and appropriate pricing. >> i think people are feeling more confident. balance sheets are cleaned up both on an individual and company level. i think we have incremental process. and against that, i can we like the idea of healthy moments and we're sell writing our growth and investments. >> we're coming into a period where we're starting to see some better economic growth in the u.s. the stock market has performance
roently well early in the year. for our customer, it's still all about how do they feel about their network and how is the stock market doing? >> because of the economic environment we've experienced in the last couple of years, exceptional product and a great customer experience, there's opportunity for share gain. we believe if we can see it on our terms in thaur environment, we're still going to win. >> it starts and ends with product. >> mickey really stirred the pot during the korns when he said it's unbelievable that amazon hasn't been mentioned. >> that's good. yeah. i guess jeff basel doesn't show up for these things, but he is one of the big elephants on the block, too. >> most definitely. and we know they're willing to take a loss sometimes just to gain that market share and it does seem to be worrying folks so much so that they're afraid to talk about it.
>> were the abercrombie guys there? >> no. >> i want to get that guy there. >> you want to get him on the plane. you have to follow the rules, have to have the right uniform. >> what's the song they sing? >> phil collins. but a lot of other rules, too. >> you're not allowed to wear flip-flops. >> and they can only address them -- >> wear the same cologne, too. >> there has to be less pumping out. >> special tea this morning. >> i'm never going to be invited into this conversation. >> you have to use white gloves in the morning and black gloves after -- >> there's an article in the new york post we're talking about. >> they're not going to talk to you about that at the conference. i guess you could ask about
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good morning. welcome to "squawk box" on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. >> what are you laughing about? >> i don't know. she's tweet, people. don't ever discuss another person's appearance on the air. i mean, have you seen -- the show's 18 years old now. 18 years old. and st. louis i -- are you getting people -- >> i just blocked. how do you do that? i go on to the person, press on the little head, block. bye. gone. history. our top corporate story today is dell. the company is said to be in talk wes private equity firms on wall street buyouts. tpg and silver lake could team up with the investor the the and other funds. jpmorgan is involved in the negotiations. i want to show this picture,
where is it, becky? do we still have it? in the "wall street journal." yeah, give it to me. i had it ready to go of michael dell. michael watches and i just want to embarass him. he was a billionaire before he was 30. anyway, this is the picture. that's what he look like when he started it. i mean, he was the nerdiest college dude. but then he -- >> but he is a -- >> he had a makeover. he's a stud. >> he got contact lenses, he's totally buffed up now and he has a beautiful wife and a beautiful family. but he had the makeover that bill gates never had. >> by the way, the picture we have up of him does not do him
justice. >> he said that's him after his maim makeover. >> but bill gates has gotten much more statesman like over the years. >> no. but here is my other point. and that is the ubiquitous pc where you used to walk into -- even cnbc and see a sea of dells. you still do that. >> i still have them up on mine. >> but it seemed like the world could never change. thou we're talking about a buyout of this company, 25 billion in apple which also ran with macintosh's 500 billion. >> and dell has a shrinking share of it, too. >> but it's not just the pc. the pc is a declining market and dell has a declining share of that. >> they referred to it as following the end of the -- because that's the first paragraph of the journal. following the end of the personal computer boom. >> two items on this.
it's not clear. >> did you see the glasses he used to wear, too? >> i had big, big glasses. back in the '90s, it was cool to have bigger glasses. >> but you didn't have a billion dollars and you didn't start a company in your college dorm. >> i am not him. >> the chances of this actually happening are very, very slim. >> that's a lot of money. >> it's not just that element of it. so we're talking about a company with a market cap of $20 billion. they have $9 billion of debt. the most interesting piece of this is they have $11 billion of cash, however, most of it is overseas. so to get that cash back, you probably have to take a tax hit unless you can wait for a tax holiday. and there is a conversation going on internally with some of the private equity guys about that. so there's a lot of things that have to go right for this to actually happen. and, again, this becomes a cash deal, meaning you're not hoping this company grows. you're basically playing for cash as long as you can and hoping you can pay down the
debt, which you could probably actually do relatively quickly and highways how you get a transaction like this done. take a look at this. i don't think people remember. he publicly talked back in 2010 about taking the company private back when it was up at 27 -- i thought the stock was up to $27 billion or $27. >> it's kind of nebulous. >> well, there's something happening. >> there people talking. i think it's early, like way early. >> six weeks at least before -- >> pisani was reporting from stuff from tony sakanati, bernstein, he was saying that it's more likely that they split the company in two. >> the other thing that's worth noting and hard to pinpoint what it means, they're head of mergers and acquisitions just left the company and went to blackstone literally two weeks ago. >> and some people say that he had been associated with an aggressive strategy to try and diversify away from pcs and
maybe the company is set on this other part. we'll see. >> sergei and vary never got that cool, either, right? they're nerdy guys. >> i don't know larry as well, but i think sergei, i think he's got it going on. >> but the other one is still nerd city. >> no, i didn't say that. that's your words. >> if we're not going to be able to talk about what we talk about off camera, then i'm going going to bring it up any more. >> okay. thank you. lawmakers are looking at superstorm sandy relief today. pet peter, this has been a raging argument, particularly in this part of the country where there are so many people who have been affected by this. people say this bill is loaded with pork. but is this any different than how things have been done in the past?
>> we're hoping it will be a break from the past. this is the first fiscal policy test of the new congress. they've got three parts to the test. one, can they spend less than $60 billion monstrosity the senate tried to ram through last year? two, will they offset whatever they do spend with cuts else where the in the budget? and three, can they avoid tax increases as offsets, things like taking away commonly used deductions and credits from one industry or ott like big oil, as they call out the it. >> peter, i did look through some of the stuff marked up in the senate. you can see where aides wrote in and said this is not going to go just for places that were affected in the northeast, but we want some help down here in mississippi or in other areas, too. some of that damage, some of what they were asking for was damage from other storms that were hit. is it fair to say that if this is a relief bill, if there are things put in for other storms, that that should be okay to go
through? >> it should be part of the regular order. that's the problem here. the emergency designate d label has been abused. if you take a look at the past 0 years of these emergency bills, about two-thirds of them eventually come in over whatever the president requested. right now, they're about at the president's request on the senate side. a lot lower than the president's request in the house. but just wait until both chambers confer on a final bill. we could see a much higher price tag. that's the big worry here. >> your points are good ones. but at the same time, i believe october 29th or on 30th is the day of sandy. are there people who have left without their homes, i have neighbors whose homes were destroyed by these things. there have been businesses completely shut down and they need the help.
hoe how do we stream line the process so they get this help? >> it's absolutely shameful. there's a $17 billion package that congressman harold rogers has put together, an argument by congressman nick mulvaney that would offset off of that $17 billion with spending constructions elsewhere. that is what they should have done back in december when they had the chance. if we want this to work better in the future, several things have to happen. we have to have a streamlined process for immediate humanitarian aide so congress doesn't get involved in the act with pork barreling. we have to have more mitigation. you spend a dollar on things like helping to preserve natural barrier islands and whatnot between storms, it pays off with several dollars of less damage in the future. we also have to have catastrophic reserves in the federal budget to pay out for
disasters so that we don't go through all this haggling and pork barrel spending. >> whose fault is this? the senate passed a bill and at the same time, the house didn't pass a bill at all. >> yeah. i think that the process broke down somewhere in late november/early december when congress had the chance to take a quick breather and say, let's get the job done with replenishing the national flood insurance program and getting immediate humanitarian assistance to people. i think it was bad communication between the house and senate. the president got involved probably at the wrong time by saying house and senate shame on you. well, it's shame on all of washington for the breakdown here when you start funding things like amtrak that's not related to sandy or buying automobiles for a federal department that has 40,000 cars
and you're spending over $1 million replacing a few of them. those kinds of things aren't necessary. so there are lots of elements of the federal bureaucracy as well as the political establishment to blame here. >> i think we've gotten a few too close-up looks here in washington. peter, thank you for your time today. >> my pleasure. >> we'll continue talking about this. we'll talk with congressman frank malone whose district was hit hard by jersey. >> zuckerberg still needs a makeover. not nearly as cool as justin particular better lake. >> how about the spanish guy? spider-man is much cooler than the guy you had on. spider-man, right? >> i know who you're talking about. what's his name? andrew -- that's the actor. >> not andrew garfield.
>> right. >> no, that's the actor. >> no. you know who is ready for -- winkelvye. they're too good looking to be billionaires. >> i think they have several hundred million dollars. >> i know they do. what are you going to do with several hundred million? >> yeah, nerd. all right. if you have comments -- >> how about the picture i've seen with you with your moustache? >> that's bad. >> i know. keep it up. i'm going to show it. >> don't show many without my hair. comments, questions about anything you see here on squawk, e-mail us, firstname.lastname@example.org. coming up, our next guest manages billions of dollars and advises the new york fed. find out why garth cease opportunities in the markets. that's next. what are you doing?
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into welcome back. welcome back, garth freeman. the year started out pretty good. what is your year-end target, do you think? >> we focus primarily on the triple income in the markets. our general view is it could be a supportive year for equities this year. >> why would it be good tore bonds? >> it doesn't have to be bad for bonds. we have a supportive market. from most expectations, we're looking at a couple of years of zero interest rate policy. and also, inflation is only 2
1/2. >> but is the great bear market has started in bonds. is that true? >> i don't think so. i think it's still too early to call bonds. and to get a bear market in bonds, we have to think two things. an act of federationings rates, which is still a couple years ago. >> or a good economy? >> not necessarily. it was so reasonably well contained. >> wa does that leave you to do for clients, then? >> well, it's interesting. well, it may not be our central view that the bear case for bonds is here. we're fielding a lot more questions for our clients looking for protection, even if it's not in 2013. but 2014, 2015 to get some protection about higher interest rates. >> so what would you do? >> it was a whole host -- >> chips or something?
>> well, there's good option strategies, a very well developed option market on the interest rate side. >> sounds complemented for our average viewer, right? >> it's a little more complicated, but so much money has been lost betting interest rates, traditional methods of shorting bond futures, shorting rates, that it makes sense to look at small strategy ta gives you a lot of staying power. >> wa about converts or junk? >> yeah, high yield. >> interesting with interest rates going up, doesn't necessarily mean junk yields would go up. you would think if interest rates are going up, ultimately, it's been corroborate with a strong economy which tends to be a good environment for higher yield debt as the stronger economy would still translate to lower defaults and better credit in general. so i wouldn't say that betting on higher corporate yields, particularly higher junk or high
yield rates is the best way to bet on interest rates. >> what could we look for for a total return for the next couple of years if we did everything right? >> on the upon side? >> yeah. >> you're still probably looking for total returns in the mid single digits, which would include a coupon that you're getting. >> you think equities could be okay, though? >> absolutely. >> we appreciate it. thank you. we're going to take a quick break right now the we're going to head over to the chairs and squawk on the newspaper headlines catching our attention this morning. in the next hour of squawk, we have two well known american businessmen, billionaires richard lefrak and william ross will be our guest hosts. that's coming up at 7:00 oom eastern time. plus, we have a top ranked
analyst making an announcement reporting facebook. and at 7:40, we'll have nissan's ceo carlos ghosn. this is america. we don't let frequent heartburn come between us and what we love. so if you're one of them people who gets heartburn and then treats day after day... block the acid with prilosec otc and don't get heartburn in the first place! [ male announcer ] one pill each morning. 24 hours. zero heartburn. and having an investment expert like northern trust by your side makes all the difference. we add precision to your portfolio construction
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lot of places. last night "nightly news "was talking about it. we've all heard about coca-cola and how really the beverage industry overall, the sugary beverage industry is being attacked by mayor bloomberg. coca-cola is now taking a step in fighting back. they have a new ad campaign that takes this head-on, and shows all of the different things that they offer, including dasani water, all their different offerings and juices. the ad says all calories count, no matter where they come from, including coca-cola and everything else with calories, and if you eat and drink more calories than you burn off, you will gain weight. critics are already taking aim at these ads because clearly the ads are trying to get out in front of this new national thing. they're talking about how they've started shrinking some of the offerings they have. they've put the calorie count on the side of the label so people could see it. critics are saying, look, sugary drinks account for more of the problem in obesity than anything else. but part of this is a lifestyle issue. it says people have not been exercising. kids at schools aren't going to
gyms as often. two thirds of adults and one-third of children are overweight or obese in this country. >> i think that's a false narrative that sugary drinks account -- >> that's what the critics are saying. >> i know. i just don't believe it. i won't drink sugar. i won't waste my -- i won't waste the calories because it's not worth it. i don't get enough bang for my buck by drinking a coke. but i reserve the right to do so. if i decide to do the 200 calories on a coke -- >> high fructose corn syrup which was not in these drink 20s years ago has had a huge effect in the way it affects your metabolism. >> you can do an apples to apples on regular sucrose or fructose. >> people say they're much worse calories. they make you more hungry. they burn in a different way. there's issues about that. there's always been issues. >> there's a related story that talks about how calories from alcoholic beverages add up to -- >> that i don't forego. >> 19% of men and 6% of women
down more than 300 calories a day from alcoholic drinks. >> that's why i won't drink the coke, so i can drink the alcohol. if i'm going to blow those calories. i watched -- we haven't had the inauguration yet. the president is very confrontational. i don't know about a rise above. i'm going to start wearing it again. because our work is not done. it's very -- very confrontational yesterday. interesting piece in the "journal" about the taxes are, we're trying to figure out. that was only step one. we're trying to figure out how to raise some more revenue. that's going to happen. every democrat out there, that's all they're talking about, and they have some -- we're going to close loopholes. but one of the things that i noticed yesterday, the president's very deft at handling his press corps in there. and i mentioned this off camera to becky. most of the press corps, when they decide they're going to really give the president a hard time, they attack him from the left. they say you know, mr. president, you said you'd
never extend bush tax cuts for the wealthy and you did that once. and this time around, mr. president, you said you wouldn't go above 250,000, and you went to 400,000. and they really think they're grilling him on, and only one guy yesterday i saw, major garrett, finally asked him some questions i wanted to ask. he said mr. president you said that we'd never use the debt ceiling to negotiate. there's been three or four deficit deals reached during debt ceiling negotiations. that's what they've been used for in the past. in fact, you voted no on raising the debt ceiling in 2006, and some other things. and then to see him actually, he looked shocked that his loyal cadre of acolytes that someone would actually broach the subject that, you know, that he actually had a tough time answering. >> i think it shows the position he's in, though. he gets attacked from the right and the left. >> he doesn't get attack. the questions i want asked are
never asked of him anywhere. >> he should come on "squawk." >> that's not going to happen. >> i'll get out. is that possible? >> no. >> i had a story but we'll talk about that one later. >> what's your story? >> we'll do it later in the broadcast. >> about nerds? >> what else would it be about? you want me to talk to here? i'm going to talk to here. coming up this morning's top stories, plus we're going to hop behind the wheel with nissan ceo carlos ghosn at the detroit auto show. first check this out, double the guest host, double the billionaires, double the fun on "squawk box." richard lefrak and wilbur ross right there and i've got to get my double stuffed oreos. >> double your pleasure with doublemint gum. see, i figured low testosterone would decrease my sex drive... but when i started losing energy and became moody... that's when i had an honest conversation with my doctor. we discussed all the symptoms... then he gave me some blood tests. showed it was low t. that's it. it was a number -- not just me.
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dell reportedly considering going private. apple's stock drops. and facebook's big announcement dominating market headlines. what you need to know before the market opens and that first trade happens. pork barrel spending or storm relief? a controversial bill hitting the house floor today for a vote in new jersey congressman frank pallone on sandy relief efforts and why this money is so badly needed. >> and two market masters share their thoughts on everything from the debt ceiling to europe. vulture investor wilbur ross and real estate mogul richard la frank are here as the second hour of "squawk box" starts right now. good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. in studio, sharing their thoughts on the markets and much more this morning we have richard lefrak who is the president of the lefrak organization, this is his song. joe gave it to him. also wilbur ross, who is the
chairman and ceo of w.l. ross and company. wilbur, we need a song for you, too. >> i thought -- i thought about one, but it wouldn't be nice. because wilbur, remember wilbur from -- we don't want to play a horse is a horse is a horse, that would be disrespectful and not a good song. we need a better song. but i don't know what to use. >> ross. >> think about it. >> how about white christmas? >> by the way, you think le freak -- >> you know when you call someone a freak you know what you're talking about. >> oh, really? >> yeah. >> you say she's a freak. i mean -- yeah, that's what we're talking about. >> thank you. >> you're the man. we got a lot to talk about this morning, guys. let's take a look at the futures before we go through these stories. right now those dow future bounce by about 29 points. also, the nasdaq and the s&p futures a little weaker this morning. in our headlines today, facebook is set for a widely touted media event that's happening today. no one is exactly sure what the company's going to be
announcing. although speculation has ranged from a mobile phone to a new building. we will have more on this story in just a few minutes. plus it is a busy morning for economic numbers. we've got december figures for retail sales and producer prices that are due at 8:30 eastern time. analysts think that retail sales rose 0.2% last month with producer prices registering a decline of 0.1%. and leonard is reporting fourth quarter profit of 56 cents a share. that's above the street's expectations of 44 cents. lennar says the new orders and deliveries were up 32% over a year earlier and that it sees strong profitability in 2013. >> okay. becky, the other big story of the morning dell shares surging after reports surfaced of a potential buyout. "the wall street journal" says that private equity firm silver lake partners and tpg have been in talks with the computermaker about taking the company private. joining us is our private ek wit at the expert from boston dan. >> good morning. >> so this would be a huge, huge
20 plus billion dollar transaction. do you think it can actually happen in this environment? >> no, i don't. now, never say never. stranger things have happened. you've got pension funds, maybe a big sovereign wealth fund comes in. but you'd have to be talking about gst 23 billion, maybe $25 billion deal altogether and i know that dell's got a lot of cash on the books that can kind of help take some of the risk off for the bankers who would have to provide the leveraged financing here. but not enough. a lot of that cash is held overseas so you'd have the big tax implication. it seems a little too big. i talked to a private equity investor yesterday not at tpg or silver lake and he said this is a real, real stretch to get done. >> we're talking about a market cap somewhere in terms of, with a premium in success of sst 20 billion. i don't know what number you want to put on that. you have about $11 billion that you said in cash, but you've got to bring some of that and repatriate it back. you don't know if there's going to be a tax holiday. >> plus $5 billion in debt,
almost $5 billion in debt on the books so you kind of have to cut that out, so it's kind of $6 billion in net cash. >> what would be the equity check? and what would be the amount of money they have to raise in terms of financing from the bank? >> i think you're probably talking total equity between six and eight. some would be michael dell's, he'd roll over 3. so maybe between 4 billion and 5 billion dollars in equity or cash the private equity firms would have to raise, get from their coinvestors, et cetera. >> we have wilbur ross here on the set. and i should ask wilbur since this is your business. 20 plus billion dollar buyout transaction, does this make sense to you? >> well, i think the quantity of cash is there. whether the numbers work, i think, is the other question. but, for example, the european -- the fact they've got a lot of cash offshore, you could just as well do euro/dollar bond issue or something of that suit. i don't think that's the big hurdle. the big hurdle is would the lbo
leverage sponsors and equity sponsors buy into the theory that it was really going to turn around quickly. remember this is a company whose earnings have been in kind of free-fall. >> dan, what kind of check did you say the banks would have to write in terms of financing? >> the banks would probably have to write a check of around $15 billion. and as wilbur says, the cash is there. this is a very good credit environment. but that is a huge amount of financing for an lbo. in fact we haven't seen something like that since the financial crisis, and you're not buying into a great road story here. you're not buying into energy. you're buying into dell. basically the banks would be asked to do a bet on the personal computer market. >> dan, the second piece of this, as i think about it, though, is this idea that you're actually going back to the club deal, right? you're having two firms club up, and now with something that was, almost, i thought it was now a relic of the 2007, '06, '05 and people were no longer going to do that, at best, they were going to partner potentially with their own limited partners
like the pension funds but not necessarily together to fund themselves. >> yeah, and it's particularly interesting that tpg is involved in this. one of the biggest private equity firms in the world but they might have some troubles fund-raising next time out. their performance hasn't been good the last two funds. one of the things they've been telling their own investors getting ready for a fund raise later this year is we haven't been doing club deals. out of their current fund they haven't done a single club deal. i know they're talked about with best buy. but this would be, you know, not violating that because they didn't make a pledge but that's kind of been a good talking point for them that they'd lose in part of this. >> becky had mentioned i think it was pisani who was talking about whether you could break up dell into two different companies. >> he was quoting tony -- >> and whether you break up the company and then they take one piece of it private and leave one out public. >> it's a possibility. you know, it's a possibility. it's not usually what the private equity firms do with something like this and the big question would be where does michael dell go now? which piece does he get? which piece does he run?
>> so, if we're all waking up this morning, trying to make sense of this, you're cautioning people that this is not happening? if you're handicapping this is that a 50/50 not happening or 90-10 not happening? >> i think it's kind of an 80/20 not happening. i mean in the end getting done. you know, actually getting finance, getting closed, actually happening. really happening. >> you want to wager? >> i think it's 50/50. >> lefrak you have views on this? >> you mean the dell guys coming back? >> maybe we could pay them stock, i don't know. >> i didn't think about that. if that's part of this deal, 80/20 it happens if the dell guy comes back. >> okay we're going to leave it there, dan. thank you for helping us sort through some of this. we'll see where this goes and i'm sure we'll talk to you again about it if it does move forward. >> 50/50. >> thanks, dan. fed chairman ben bernanke calling on congress to raise the debt ceiling to avoid a potentially disastrous debt
default. >> raising the debt ceiling, which congress has to do periodically, gives the government the ability to pay its existing bills. it doesn't create new deficits. it doesn't create new spending. so not raising the debt ceiling is sort of like a family which is trying to improve its credit rating saying oh, i know how we can save money we won't pay our credit card bills. not the most effective way to improve your credit rating. >> but the chairman was fairly upbeat on the outlook for u.s. growth. but, gave no clear hints on when the fed would curb its aggressive bond purchases. we'll have more on the debt ceiling in the next hour when we speak to senator rob portman. you guys, wilbur, you also said we have -- we are fully ready with inflation, we have all the tools we need to exit. >> well, i caution a little bit. historically the fed has always bought short-term paper and it's easy then to raise the interest
rates. again you let the paper roll off, you sell it. now they've been buying long-term paper. rates start to go up, fed could get creamed in terms of their own balance sheet, because of the losses. if rates went to their ten-year average, the fed portfolio would be down 23%. they don't have 23% equity. >> and richard, i saw bill miller came back with a vengeance this year betting on housing, and financials. >> yes. >> and huge returns. i mean 40% i'm thinking. >> so did you -- you watched that happen in your business? >> yes, yes. and you know, we're seeing the housing business stabilizing, you know, part of that is we've got a little better job creation in the economy and we're kind of working on ways to work slowly and credit markets are a little better for people that have credit, so i mean, all of those things are happening. but, i would say they're happening slowly. they're not happening quickly.
and you tend to think house prices -- >> just ball park and i don't mean to get personal with you but how much more are you worth than the last time you were on? 30% more? >> well, i just paid the tolls, so you know -- >> i'll bet your what you own is worth 20% or 30% more than the last time you were on. >> i never discuss that. >> i know. but in general, say if someone like you, if they own something similar to you -- >> no, i would say this, anybody who owns hard assets -- >> they've done well? >> that are well financed, taking advantage of very low interest rates have a very good opportunity facing them, because if inflation is coming, then the hard assets will be worth more and the value will also be in the financing. so i would say yes, there's some potential for that in my portfolio. >> okay. you're feeling good. you're happy? you're good?
>> i'm happy to be here, joe, becky, andrew. >> no, i'm happy. you know what i'm happy for you. you know i didn't ask you that, wilbur. you've done pretty well. >> well, we've been in -- >> the world's a better place than it was a year ago. >> oh, it certainly is in terms of prices. yeah. also we've been getting all of our companies to lock in long-term fixed rate financing, because i think at the end of the day, the biggest bubble is going to be the u.s. treasury bond, and the german bund. >> why? why the bund, too? >> well, because it's such a trivial interest rate. >> you know, if you're a businessman, business person, and you can borrow money at 3%, 4% from, and if you can't make a positive spread to that, you shouldn't be in business. you just shouldn't, because you're just not talented enough. i mean, you know, it's not that high a hurdle to get over. >> right. >> nice segue to a story about
another guy who some people said had talent and some people said had something else. lance armstrong sat down with oprah winfrey. what do you think of that segue? confessed using performance enhancing drugs during his cycling career. the interview scheduled to broadcast on oprah's network on thursday. here's the important part. it's unclear how forthcoming armstrong was about his doping program. "the new york times" is reporting he'd also planning to testify against several powerful people in cycling who knew about his doping and possibly facilitated it. he's also said to be in discussions with the department of justice now to possibly testify in a federal whistle-blower case, that case involving the cycling team sponsored by the united states postal service and armstrong would testify against several team owners, including investment banker thomas waddell who founded the team and ultimately financed much of armstrong's early career and much of the later, i don't know, did either of you guys know tom? >> i know tom. >> what do you think? he was behind the yahoo! he was the yahoo! ipo. >> oh, he was a great investor. a great high tech investor.
i can't believe that he would have been involved with the doping. at all. >> it's impossible in your mind? >> i just kind of -- >> you think that he would be financing it the whole time without knowing what's going on? >> what's even stranger, what is the u.s. postal doing financing bicycle riding? with all the problems they have, they can't even deliver the mail on time, so why are they putting money into bike racing? >> it was a sponsorship. does that not make -- >> by the way, one quote, if we could, if you could indulge me, a quote from wisele that i thought explained -- this is his view on doping. this is what he said to "the wall street journal" four years ago. handle the problem below the surface, and keep the image of the sport clean. in the u.s. sports, baseball, basketball, football, most fans couldn't care less. so i'm not so sure that he is all for clean sport. >> he's giving up a high
official in biking. >> oh, you're saying -- >> in other words, that's what his -- >> i think they end up having to give up a lot of people within the sport and people who were part of the doping agencies. >> if people don't care, why did no one get elected to the baseball hall of fame this year? >> that's right. >> not one person. the one silver lining to this whole, and i think about things in these context, own, oprah's network, huge. >> not only that. but she got letterman, too. >> yeah. if you don't know where o.w.n. is now you're going to know where that network is probably after -- >> let me say something else to you, do you remember what the team's name was after the postal service? discovery channel. >> really? now that i didn't think of. that's not the silver lining. you shouldn't have brought that up. >> we do love you, david. >> postal service is a great -- that's the precursor to --
>> yes. you've got comments, questions, anything you see on "squawk," shoot us an e-mail. you can also follow us on twitter. after the break, social medialites are abuzz about what could become of facebook today. the company set to makeary major announcement. the stock is up nicely hitting the bottom was $17.50 back in september. now the question is, is this wrung over or just beginning? we're going to find out when we return. >> thinking of facebook, make sure you like the "squawk" facebook page and stay in touch with your favorite morning business show. news, videos, photos and upcoming guests. like the show and look for an updates daily. "squawk box" on cnbc.
a stock to watch this morning, forest labs posted weaker than expected quarterly results, in fact it was a loss of 21 cents a share, so that, i think they're expecting a loss of about 14 cents in revenue, also fell shy of expectations. >> okay. the other big story, facebook shares have been moving higher and now the company is holding a mystery media event later today. joining us now from new york, dean munster the piper jaffray managing director. we're pleased to have you here this morning. what do we think this is, gene? >> well, it's easy to get
excited when they don't tell us a lot so i appreciate the suspense from facebook. but the reality is we probably think the core of what's going to get announced today is just changes to the basic flow of paib. so you have time line and news feed, those are the core platforms. on top of that the wild card which we think could happen is some integration with bing and social search which would be something unique. but i think from just a high level, probably, you know, facebook is moving in the right direction, but maybe a little bit of disappointment based on the hype because it's probably more tweaks to the platform versus anything that's going to be new. >> people have been talking about a bing revenue opportunity whether it be some form of video enhancement that's going to get in here, or search. do you see whatever you're talking about in terms of just a change in the time line being enough to change the game on the revenue side? >> that probably isn't. but i think you bring up a good point. you have video, you have search, you have commerce, you have an ad network. they've got a lot of opportunities. the reason we're not convinced
that's going to happen today is too many people talk. and nothing substantial has been leaked out of this. and so, we think it's going to be more platform related. so all the things that you talked about, i think, more importantly, facebook will roll out next year, in two years, so there's a lot of opportunities that they have beyond what we can see today. >> do you think facebook's gotten its mobile strategy in order yet? >> you know, we'll learn a lot more when they report next week. i think that they do. if you look at the total number for next year, it's going to be about 25% of their revenue -- sorry this year is going to be mobile related. that's up from about 6% last year, and zero in 2011. it seems like they're making a lot of attraction. the bogey for the december quarter is 300 to 350 million in search revenue up from 152 million in the september quarter. so, looking at 100% quarter over quarter growth. that's pretty impressive. >> what's a fair price for facebook stock? >> you know, we think there's meaningful $38 price target
today. but ultimately you've got to look at the market -- >> it's already trading at like 50 times. >> well, that's a good point. but i think in this case, it's better to look at the opportunity that they have relative to the market cap. you look at google, global company, $240 million market cap. facebook $80 billion market cap. call it 30% of the size of google. the engagement -- >> the p/e on google is like 15 or something. >> right. but if you go back and look at other emerging growth stories which haven't come into modernization, for example, you have to look at it in the greater opportunity of where they could ultimately go. right now, facebook has about 8% of the advertising market. they're talking about a 12% this year. google has obviously a much bigger share of that. i think you need to look at it in the context of an epf multiple you're going to miss this. if you look at this in the context of the markets they're going after, the engagements they have for opportunities i
think there's a great argument for upside to the stock. >> what's your number? give us a target number? >> target number for what? >> for facebook. >> for a stock? $38 price target right now. >> okay. >> back to the ipo price? >> back to the ipo price. i think but ultimately we would revisit those numbers as some of these other monetization opportunities start to roll out. it's hard to raise our numbers when they're not out. so, as we're not expecting a lot today. but there's three other big opportunities that they can go after. as those things roll out i think you're going to start to see more and more monetization. and i think you just got to shift a little bit of the perspective on it. think about the valuation on it. >> okay. before we let you go, gene, i don't know if it's a company that you cover, ali baba, if you saw the news, jack will be stepping down from the ceo role. does that mean anything? >> you know, i think the big impact on u.s. stocks is yahoo!'s investment in ali baba and their e-commerce. that's a big surprise, jack maw
has an ego the size of china. ultimately i don't think it changes the monetization or the ipo window for yahoo! and their ali baba assets. >> thank you for your perspective. >> thank you. >> and coming up, much more on dell possibly going private. and a big vote today in washington on a $51 billion relief bill for superstorm sandy victims. many argue the bill's loaded with pork barrel spending. new jersey congressman frank pallone will join us and the futures at this point just slightly, well actually it's gotten a little business worse, down about 36 points. so far on the session. "squawk box" coming right back. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries?
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1970s and 1980s. i talked to him last night. he said i'm 48 years old, i'm too old to be the ceo of this company. when i was 35, i had vigor and spirit, and i've lost that. and the younger people know more about the internet and more about mobile. >> how do you feel about that? >> -- made that pronouncement. >> i'm 48. i'm too old to be the ceo of the company. >> all right. if you have any comments or questions about anything you see here on "squawk" this morning, go ahead and e-mail us at squawk @cnbc.com. if you have any suggestions for a song for wilbur. tell us about that. joe's got one. we'd like to hear your comments, too. richard has freak out. >> the freak. >> because you are the freak. >> go ahead and tweet us about any of this. up next new jersey congressman frank pallone on today's hurricane sandy relief vote. and later carlos ghosn will join us from the detroit auto show.
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welcome back to "squawk box" this morning. in the made lines the ongoing battle over the debt ceiling prompting a warning from ratings agency fitch. it's saying that the failure to raise the debt ceiling in a timely manner is going to prompt a formal review of u.s. credit ratings. however fitch does add it expects congress will ultimately approve a debt ceiling increase. also this morning the postal service plans to speed up cost-cutting and revenue boosting measures. not saying exactly what steps it's going to take although it does plan to reveal them at a later time. the service has been waiting for congressional legislation to put it on more sound financial footing. but lawmakers have been occupied with the fiscal cliff, the debt ceiling, and other pressing issues. and finally radio shack is ending its mobile phone partnership with target. the venture has been unprofitable and radio shack has been unable to negotiate more favorable terms. as you know, the house is set to vote today on a $51 billion superstorm sandy package
that has already turned in to a bitter battle over spending. joining us now is congressman frank pallone, who represents the sixth district of new jersey, one of the hardest-hit areas of the jersey shore during the late october storm. and congressman, thank you for being here. this was a late october storm. we are now in january. this is still going back and forth. what's happened? >> well, unfortunately, the package was delayed. it was passed in the senate just before new year's, but then the house speaker refused to take it up, and you know, we were very critical of that, because the bill could have been passed in the house and become law with the president's signature and we'd be in the rebuilding process for the jersey shore right now. but now with more and more delay, that rebuilding process, you know, is almost not halted but it's not moving forward quick enough because we want to be ready by memorial day, you know, jobs, the tourism season, the local economy, is very dependent on tourism. and the more we delay, then the boardwalks and the streets and
other amenities are not going to be ready in time for the summer season. >> congressman, i share your frustration, as a new jersey resident. but you know as well as i do, there are concerns about what's been added onto this bill. i'm not saying that this is any different than how things have been done in the past or other aid bills that have gone through, but the complaints have come in very specifically that there have been a lot of things that have been slapped onto this bill. some of the things are $50 million for tree planting subsidies, $2 million for roof repairs at the smithsonian institution, another $15 million to repair nasa facilities and nasa has said it had very minimal sandy damage. a lot of things that add up to a lot of money. is there a way to get rid of some of those other things that have been tacked on and just get the actual aid for this disaster? >> well, let me put it to you this way. i think that the larger issue here is the second bill, the amendment, the $33 billion that's basically for preventive
efforts. in other words, we want money for the army corps of engineers so we can do the beach replen h replenishment, the dune restoration, the flood control, and also for the community development block grants that give grants, if you will, to homeowners and to businesses so they can rebuild. to me, that is really sacrosanct. if we don't have that then we're not going to be able to restore the shore. >> no, i agree with you on that point. but what about all the other things that have been packed on that are unrelated entirely to any future storm prevention or anything that's happened with sandy? >> the problem there is there hasn't been a national diss ater bill passed in i think several years and so there have been tornadoes, wildfires, other things that have occurred in the meantime that members have said should be included in this bill, even though they're not related to sandy. and i frankly don't have a problem with those initiatives, as long as they're related to some natural disaster. because, you know, it really isn't fair to ask somebody from missouri if they've had a tornado to not have their
initiative included -- >> how about $188 million for the amtrak expansion project. >> but amtrak, a lot of that is directly related to the storm because as you know, we had major damage to amtrak and to the northeast corridor train service during the storm. >> but a lot of this is for the expansion project, as well, which does not qualify for any sort of this -- >> i haven't -- you know i have to be honest, i haven't seen anything that is either -- that is not storm, or disaster related. now you know, maybe it's a little attend youated, but the fact of the matter is it's all related in some way to some kind of natural disaster. and you know, i think to hold the bill up because it's not necessarily sandy related or it seems a little attenuated as long as it's linked to a natural disaster i think it's fair that it's included and i haven't really seen anything that isn't related. >> the "journal" quoted -- how much was it, $17 billion was community activism? >> i haven't seen it myself. >> but the "journal" had -- i
mean it's a big number, congressman. it was like an exorbitant number. you know how tight money is in washington right now. it just, that's -- >> look, i can only tell you that everything from what i can see is related to some natural disaster. even if it's not sandy. we've waited nine weeks, i mean we're at the point now where if we don't get this funding package passed we're not going to be open for business by memorial day and the shore is going to suffer. so we didn't have -- nobody complained about these things when we were dealing with katrina, which was two weeks after the storm that the funding package passed. and i just think it's very unfair to our area that, you know, this debate continues, and everything continues to be delayed. >> well, we're certainly in favor of helping the people who are really in need. but i think this is another example of why the congress has lost respect of the american people. it's business as usual, ladle everything into a bill that has fundamental merit, and i think a lot of americans are very, very
disgusted with that whole way of doing business. >> here's the "journal" piece, nearly $17 billion is in the bill for the community development fund and social service grants, two long-running initiatives to fund liberal activists. >> yeah, i don't know what they're talking about. look there's a community development bloc grant which is very important for the shore area because that's the money that we're using basically to give grants to homeowners and businesses. i have a town like seabright, new jersey, where the whole business district is destroyed and only two businesses are open. and they need this cdgb money in order to restore the town. so, again, these arguments continue, and it's nine weeks, only two weeks for katrina. i mean you can understand how those of us in new york and new jersey just feel that we're being treated unfairly. >> i see it in our neighborhoods, too. i have neighbors who have been wiped out by this. >> congressman, i have many properties on the waterfront in
new jersey that had federal flood insurance on. even though those claims have been made, none of them have been remotely even recognized or paid, even though that's not a grant, or a gift. that's just getting insurance that we pay for. >> exactly. because that we voted on last week. and keep in mind that even if this whole package is successfully passed today, it still has to go to the senate. they don't meet until next week. if the senate changes it, there's another week or two delay. it's getting extremely frustrating for those of us at the shore who really, you know, want to rebuild and need help. >> where do you think this bill will wind up today? >> i hope we get the whole package. i mean, essentially there's a $17 billion initial bill, and then there's an amendment for the other $33 billion which will bring you up to the $50 billion. and that $33 billion has all the money for the shore protection, for the flood control, you know, for the preventive measures, plus the community development
block grant assistant that goes to homeowners, and businesses to help rebuild. so it's really important that we get that second amendment with the $33 billion passed. and then that would bring us back to the total $60 billion package that the senate had passed in the old session of congress, and that the speaker refused to bring up that bill. so if we can get up to that $60 billion and that goes over to the senate and it gets passed in the next week or two, then we'll have the $60 billion package that we think is necessary to restore the shore. >> okay. congressman pallone, thank you very much for your time today. >> thank you. >> still to come, richard lefrak has a theme song but wilbur ross does not. we wracked our brains, we're that going to use mr. ed. his name was wilbur post. >> yeah? >> and wilbur is not a great name. it's not a very common name. >> that's true. >> but we have found one and we're going to debut it with the animal orchestra in a couple of
minutes. up next we're going to hit the motor city and speak to nissan chief carlos ghosn. >> you want earnings? we've got earnings. tomorrow, goldman sachs and jpmorgan are the highlights of the morning. thursday blackrock, citi and pnc financial services are on the docket. friday dow component general electric reports. it's earnings central on "squawk box." all this week, starting at 6:00 a.m. eastern time. tdd#: 1-800-345-2550 when i'm trading, i'm totally focused. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 and with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime. tdd#: 1-800-345-2550 until i choose to focus on something else. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 open an account with a $50,000 deposit, tdd#: 1-800-345-2550 and get 6 months commission-free trades. tdd#: 1-800-345-2550 call 1-800-836-8799.
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all right, everybody. welcome back. the futures have turned a little weaker this morning. at this point those dow futures down close to 60 points. s&p futures down by 8 points. nasdaq a little weaker as well. krispy kreme announcing it has adopted a tax asset protection plan. the goal is to protect the company's assets by reducing the likelihood of a unintended ownership change under the technical irs rules. this plan is designed to discourage any person from becoming a 5% shareholder. so poison pill for doughnuts. >> i love krispy kremes. now it's time to get behind the wheel with nissan. the company unveiling the latest
version of the low cast verse to. phil lebeau has a very special guest. >> good morning, andrew. i'm joined by the chairman and ceo of nissan renault carlos ghosn joining us here at the detroit auto show. we're going to talk a little more about some of your newer products but so many comments regarding the leaf and the struggles you've had with it. characterize if you could what happened in 2012 with the leaf? >> well, you know, the leaf increased year on year. global sales increased by 22%. so people say we're in trouble because we said it would increase by 50% and increased by only 22%. but we -- some of them are, in fact, the product, we made a lot of modifications, we're coming with a model year 2013 taking care of these problems. a lot of them being $6,000 down -- >> you cut the price. >> cut the price $6,000. because we consider that the car was too expensive. we listen to the customer. and we're able to do it because we localize the product in the united states. used to be shipped from japan.
now it's done in tennessee. >> building them there. >> exactly. now quick charging. quick charging infrastructure. we need to do more with states, cities in order to make sure that consumer buying electric car won't have to worry about where you're going to charge. so we're going to be working on it and the car is going to continue to develop. >> are you disappointed with the sales in a sense that you thought you would have a greater acceptance rate amongst people with electric vehicles? are you now saying, maybe electric vehicles are not going to be as popular as we first thought? >> i was ceo of any car company you're going to ask is going to tell you no because you always see much more potential for your car. now i knew from the beginning that this car being revolutionary, because it's going to change a lot of things, you know, it's not going to be an easy road, but i'm firm believer in the technology, firm believer in the benefit of the car, and want it to work in a very resilient way in order to make progress. just compare the car to the high rates, in two, maybe ten years for the hybrids to do what
they're doing today on the market. moving much faster. >> we talked before we went on the air, you believe this is really, in many ways the future of the automotive industry in terms of being able to have a better sense of what these vehicles can do, and maybe it's safer out on the road, correct? >> yeah. you know, autonomous driving is a very important technical feature of the future. it has a lot of advantage. more senior people driving cars, you know, more handicapped people accessing a lot of cars, a lot of advantage for this. we just want to make the technology more reliable. we have all the devices, we have all the deck nothing available. we have prototypes that we are testing. it needs much more accurate mapping. it's very important. so that's why i'm seeing it on the market around the year 2020. obviously, this does not mean you're not going to see cars being able to do that. but these are all prototypes. but mass marketing around 2020. >> wilbur has a question back in new york. >> carlos, i think it was
yesterday, potential plans for building cars in america maybe in a joint venture. do you want to tell us a little bit more about that? >> you know, we are continue to develop our manufacturing capacity in north america, and when we develop our capacity in north america we take into consideration the needs of some of our partners. as you know, our more close partner is renault but renault is not present in north america. other partners is daimler, and we already have a common plan for doing engines with daimler. it may expand in the future to collaboration on cars. >> so for you, carlos, as we wrap up this -- i'm sorry, wilbur, do you have one more question? >> is that your answer to the problems of predatory pricing, that hurt the european car market? do joint ventures get scale in
lower cast? >> no, i don't think -- i don't think this is in response to what's going on in other market. i don't think so. i think we have a strategy today, because of a lot of suffering we had because of the exchange rate. you know, the yen going up. you know, we're trying as much as possible. we are just having industrial strategy focusing into building the cars where you're selling them and sourcing them where you are selling them. that's the main element of our strategy. so we are going to develop more capacity in north america particularly to take into consideration the fact we don't want to be too much dependent on foreign exchange rate situation. >> carlos ghosn, chairman and ceo of nissan renault. they are now building the leaf and batteries for the leaf in smyrna, tennessee. guys, back to you. >> phil, thank you very much. carlos, thank you. when we come back, president obama, treasury secretary time
geithner, and federal reserve chairman ben bernanke all say that the debt ceiling must be raised or else the economy will suffer. senator rob portman says washington's out-of-control spending has to stop. he will join us in the next hour to talk about the debt ceiling debate. "squawk box" will be right back. up next on "squawk box," don't start your day without knowing the names that will make you money. joe has your list of stocks to watch right after the break.
all right. put this on. it's traveling wilbur. we've got george harrison for your lead for your song >> no, no, no. >> that's a good one. >> but it's all right. and implied there is being a billionaire. ♪ it's all all right i mean, it's -- it is, right? life is good. >> that's true. it may not play well in washington. >> might not play well in washington. i'm going to actually give some information during this segment. much as i'd -- >> you know, that would be a switch. >> that would be a switch. let's take a look at some stocks
to watch this morning. lennar reported fourth quarter profit. 56 cents a share. 12 cents, look at the chart, we're talking about the big year that bill miller had and a lot in housing stocks, and if you went back even further you could have bought that thing even cheaper all the way back at $40. home deliveries and new orders, 32% above a year ago. forest labs we talked about earlier, losses widened to 21 cents a share. analysts were looking for just a 14 cent loss in revenue was also lower. it was the expiration of patent exclusivity for alexapro which is a drug for depression. krispy kreme unveiling a plan to protect its tax loss carry forward which it says is a valuable asset. the plan is designed to discourage anyone from owning 5% or more of the company. which in turn helps prevent an ownership change. which could negate the carry
forward. and lulu lemon lowers guidance for the current quarter which expanded the holiday shopping season. people were up at $489 million and that is below, although analysts say the chain is still executing very well. and express, has raised its fourth quarter earnings guidance to 72 to 74 cents a share. it had been 62 to 68 cents so the consensus was 66 cents. now they're going to be at least six cents ahead of that. this is a retailer for young adults, i guess limited express? >> used to be limited express. it's for women, really. >> all right. >> i don't think they sell men's clothing. i could be wrong. >> and in radio shack ending its mobile phone partnership with target. the venture's been unprofitable and radio shack is pulling the plug after it was unable to negotiate a more favorable term. >> i think there's an express
for men, not that you would know. >> yeah, right. now did you mean paul newman or paul mccartney? >> no, paul newman. >> he doesn't sing. >> neither do i. >> good. when we come back we're going to talk more about raising the debt ceiling. this is going to be a contentious argument when washington takes this up, both sides are really digging in their heels. we have senator rob portman who will join us to talk about all of these issues. plus an outlook for the housing sector. home services america ceo ron peltier on real estate and the strength of the housing market. he can talk more with richard lefrak who is here as our guest host. "squawk box" will be back right after this. >> comments, questions? send them to @squawkcnbc on twitter. follow the show and look for updates from andrew, becky, joe and the "squawk" staff. "squawk box" on cnbc. and on twitter.
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nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today. [ male announcer ] save on ground shipping at fedex office. president obama warning americans of the consequences of the u.s. defaulting on its loans. >> markets could go haywire. interest rates would spike for anybody who borrows money. >> we'll ask republican senator rob portman how lawmakers can
rise above politics to tackle america's debt crisis. the government taking a bigger bite out of your pay check. the ceo of adp will join us. the company processes payroll for one out of every six american workers. >> and facebook's big surprise. >> people will come, ray. people will most definitely come. >> they built something and they're hoping people will come. we're going to find out today if their field of dreams strategy pays off, the third hour of "squawk box" starts right now. >> welcome back to "squawk box" here on cnbc, first in business worldwide, i'm joe kernen along with becky quick and andrew ross sorkin. our guest host this morning i think we introduced richard first last time. now we're going to introduce wilb wilbur. is that okay? lefrak is before ross in the
alphabet. wilbur ross is here, chairman and ceo of w.l. ross and company and real estate magnate, in the past we've called you above magnate, i think, richard lefrak, president of the lefrak organization. >> what's above magnate? >> a tycoon? mogul? >> where are you now? are you magnate? >> living on -- >> -- important i don't think. >> i think magnate is -- maven? >> i don't like that. >> no, no. >> maven? >> you like magnate? >> yeah. >> from both of these -- yeah, great. and lefrak. in just a moment and then andrew has the morning headlines. andrew? >> i do. our top tech story of the morning, facebook's surprise announcement coming later today. julie boorstin is going to join us in a few minutes with more details. also watching shares of dell this morning. the company said to be in talks
with private equity firms on potential buyout. "the wall street journal" reporting that tpg and silver light could team up on a possible offer. "the wall street journal" saying that jpmorgan is also involved in the negotiations, and dell shares this morning have soared to a near eight-month high on word of that news which did come yesterday. however, worth noting that dan primack said he thinks the chances are slim this transaction actually gets done. in washington today the house will begin a debate on a $51 billion bill for superstorm sandy victims. of course, the fate of that vote is unclear. more than 90 amendments have been filed by friday. earlier we spoke to new jersey congressman frank pallone. his district is badly in need of funding for the recovery effort. here's what he had to say about the amendments that have been characterized as pork, attached to the sandy relief bill. >> everything from what i can see is related to some natural
disaster. even if it's not sandy. we've waited nine weeks. i mean we're at the point now where if we don't get this funding package passed we're not going to be open for business by memorial day, and the shore is going to suffer. >> the senate is expected to take up whatever legislation the house approves. >> let's get a check on the markets this morning. we've been watching u.s. equity futures and things did turn a little lower than when we first started out this morning. the dow futures down by just over 51 points. s&p futures down by close to 7 points. overseas in asia overnight the markets closed mixed there. not massive moves but in japan the nikkei was up by about 7 tns%. in europe right now you can see that things are barely moving. this is kind of similar to what we've been watching in the mornings for the last couple of weeks there. minor moves, except for in germany where the dax is down by almost half a percent. facebook is holding that event later today. people have been whispering about it, talking about it, trying to figure out what's happening. so we went julia boorstin to see what they are building.
julia joins us right now from outside facebook headquarters in menlo park, california. good early morning to you, julia. >> good morning to you, becky. facebook has been keeping this event very much under wraps. and even though i don't think the announcement is about a new phone handset, i do think it likely has something to do with mobile, considering mark zuckerberg and sheryl sandberg's priority on making money on mobile users. die expect zuckerberg to take the stage here today and i anticipate i will unveil a new product, something that will impact experience rather than a back end change like a new ad system. so what can it be? an app like mobile video chat or something like a new app store, a new mobile time line or a job board? rbc capital markets speculates that it could be a social search engines. facebook's mystery announcement comes on the heels of a slew of positive analyst reports. just yesterday, facebook was upgraded from hold to buy and oppenheimer raised its earnings
outlook and price target. piper jaffray says the price holds back because the announcement today turns out not to be a major one he sees that as a buying opportunity for facebook. i'll be inside the event which starts at 1:00 p.m. eastern here today. facebook is not livestreaming the event as they have other events and they're not letting in broadcast cameras. but i will be inside and i will bring you all the headlines. back over to you. >> okay. julia, as we know you will. thank you. as we near the debt ceiling, what does washington need to do to get our nation's finances back on track? joining us now from new york is republican senator rob portman. a member of the senate finance committee, and budget committee. rob, it's good to see you. >> thanks for having me on again, my friend. >> you're welcome. you saw the -- the press conference yesterday, i guess? >> i did. i was surprised. >> tell me why. >> because the president's ignoring the big issue. i mean, he is misleading folks
about what's going on here. he's saying we ought to pay our ibms. of course we ought to pay our bills. that misses the point. the point is what are the bills going forward going to be? i mean look we're $130,000 now per family in debt, record levels as you guys have talked about already this morning. if we don't deal with this crushing debt we will not be able to get the kind of economic recovery we all hope for. it's generational theft for future generations. the president says let's extend it and give me a blank check. the point was made in the press confidence, which i thought was interesting q&a that the president himself voted against the debt limit saying it was unpatriotic to run up these huge debts, that was $6 trillion ago. the president also went on to say gosh it would be unrealistic to tie deficit reduction to raising the debt limit when, in fact, of course, that's exactly what's been done over the years. >> i didn't -- there were specific instances cited by the
reporter that asked that question. do you remember, there were deals that got done around debt ceiling raises. >> over the past three decades it's the only thing that's worked. you remember gramm-rudman because you're a senior member of cnbc now. but back in the -- back in the '80s gramm-rudman was put in place and had reductions at a time when our debt was much smaller than it is today and our annual deficits were much smaller. that was done in the context of a debate over the debt limit. in fact, the six deficit reduction packages that have passed over the past 27 years have all been, all of them, have been in the context of the debt limit. including, of course, the budget control act two years ago. so, for the president to say it's unrealistic to tie deficit reduction to debt limit, and also to say that what -- they should be separate issues, it's just ignores reality.
do you remember his voting no in 2006? was he trying to get about 100% of what he wanted? i heard that phrase about 10 times. >> he said it was unpatriotic to vote for a debt limit increase at a time when our debt was $6 trillion smaller. he also said that it would hurt us domestically, and internationally, if we were to raise the debt limit because his high level of debt was so problematic. so he should look back at his own words. here's the opportunity going forward, joe. it's not about not paying our bills. we'll pay our bills. the question is, what should those obligations be going forward? we have to adjust. if we don't reform our spending, of course, the country careens into bankruptcy. some on your show this morning would argue we're already there. this is the opportunity to do it. i have proposed legislation that i'll be introducing our first day we're back that says let's do a dollar for dollar reduction. let's have a dollar for dollar reduction over ten years. that happens to get us over ten years back to about 20% of spending as a percent of our
economy. which is where we've been historically. since world war ii. so i think there's a logical way to get through this and we have to deal with the mandatory side of the ledger which is very important but unsustainable entitlement programs. >> senator portman, richard lefrak. >> richard, how are you? >> i read through the notes on your plan and you have interesting triggers for debt reduction and everything. but, do you think realistically you can get any bipartisan support even in the senate for your idea? >> you know, i hope so, richard. the alternative is pretty scary. that is that we go ahead and write the president the blank check. i know there's been discussion about whether there might be another downgrade if washington goes through this fight again. i think the reality is, and you tell me what you think, richard, is that standard & poor's, having already downgraded, now you turn to moody's and fitch, if we extend this debt limit
without doing anything on the deficit and long-term debt i believe we face the risk of another downgrade. i would think members of both parties would say, look, you know, as we have six times in the past, let's take advantage of this opportunity. it's been the only thing that's worked to get the deficit under control. i would say something else, richard, which is it's interesting, because if anything, now, it's more important than ever that we use the debt limit. two reasons. one, the mandatory side of the budget, which is, again, the entitlement programs that are on autopilot that are not appropriated every year is now over 60% when you include interest on the debt about 62% of the budget. so it's a bigger part of the budget. it's the fastest growing part of the budget. it's not subject to the annual corporations or the budget process. so this is the place to do it. second, there is no budget. the democrats in the senate have chosen not to put forward a budget for over three years now, which is why we don't have the normal process, which is why we have this thing called the continuing resolution. so there is no alternative, even for the doemsics discretionary
side of the budget, which is the other roughly 38% of the dungate. so i think this is the only logical place for us to deal with what i think everyone now acknowledges, which is this debt and deficit which is at historic levels and is hurting today's economy, making it difficult for you, richard, making it difficult for wilbur and making it difficult for others to take a risk to get that money off the side lines, get it engaged, invest. if we don't deal with this issue we cannot have the robust recovery we hope for. >> do you think the rating agencies are more concerned with the actual debt number than they are with what you folks are doing in washington and whether you're willing and able to come up with a deal? that seems to be the pivotal question here. >> yeah. >> and it sounds to me you're suggesting it's the debt number itself, and from what i've heard from the rating agencies they're more interested in how you are all behaving. >> no, i don't think that's accurate. i mean, they are related, of course. but, ultimately, is this andrew? >> yeah.
you have to ask? >> didn't sound like joe. >> i think ultimately, they have to be concerned about one thing. and that's what we've talked about, you know, all morning. which is how do you deal with the debt and deficit going forward? because it's unsustainable because it will otherwise bankrupt the country. the question is, you know, how do we put something together that can be passed in the house and the senate, as richard says, and signed by the president? so, i mean ultimately, it's about using this opportunity in a constructive way. so it's not about, to me, you know, whether or not we have a fight over this. unfortunately we're going to have to have a fight because the president seems to have dug in his heels and he seems to be saying, in an unprecedented way, because in the past presidents have worked with congress to try to put together something on deficit reduction, he seems to be saying we're not going to do it so we're going to have to have this fight. ultimately we've got to resolve it. the proposal that i've made is one way forward. there are other ways forward. we need a responsible approach to this. but we cannot allow this
opportunity to go forward without dealing with the underlying problem. >> senator, i know that you know the budget inside out. as a former director of the omb you have a much better knowledge of this than most people. but when it comes to using the debt ceiling we had roger altman here earlier this week. his point was why not just use the sequestration which got pushed back to march 1st, use that instead of the debt ceiling so it doesn't sway confidence or concern investors to quite the same extent? >> becky, that's fine. the problem is that was the last deficit increase. the $1.2 trillion is sort of already in the bank. the credit agencies, by the way, assume we're going to make those cuts. so if you're suggesting that we do additional sequestration on the smaller part of the budget, the 38% we talked about, domestic discretionary, i suppose that's one way you could go. but, it ignores the fact that we've got this bigger part of the budget that's more politically sensitive, but has to be dealt with. the biggest part of the budget and the fastest growing part of the budget.
it also, the $1.2 trillion is in the bank because of the discussions we had two years ago. >> you think the democrats would not see that as a credible threat? they would say go ahead, let the sequestration kick in? >> well, i think democrats and republicans alike would like to alter the way the sequestration works. but i hope that nobody's talking about not making good on our commitment to reach the $1.2 trillion. i'm certainly not. and those of us who are concerned on the across-the-board defense cuts i hope for the most part are saying we have to make these cuts. the question is how we allocate those cuts. we can't back off that, becky. that would be unbelievable that, you know, we're now negotiating on something we agreed to two years ago at a time when the debt was a couple trillion dollars less. we've got to be sure we're making progress moving forward. this debt limit discussion is an opportunity to do that. we don't have to make these cuts in the way the president talked about it at his press conference. i thought it was incredibly irresponsible to say republicans are talking about slashing spending. they wanted to gut medicare and
medicaid. that's not the point here. it's being sure these programs are saved and preserved for future generations and everyone, including the president, we talked about this in the past, understands the need to do that. >> you forgot about cutting off people with disabilities, and autistic children and a lot of -- you forgot about a lot of things that you republicans are trying to do. >> thank you, joe. >> i'll remind you. buster. all right, senator, thank you. we appreciate your time. >> thanks, guys. thanks for having me on again. >> coming up an update on the housing market from warren buffett's real estate ceo. we're going to talk to ronald peltier of home services of america after the break. does the increase in the payroll tax have you doing a paycheck double-take? how about a fica spit take? we'll ask the ceo of adp about the tax process, and what feedback they're hearing from big clients. that's still ahead on "squawk box."
intensive. but i think for somebody that is in a growing city, that can buy a house at a price that's 60%, maybe of what it was five years ago, and they could borrow 80% of it or 4% interest rate, they're going to make money. >> those were comments that mr. buffet made last may just ahead of the berkshire hathaway annual meeting. recently berkshire hathaway affiliated launched a new network called the berkshire home services. joining us right now is ron peltier, ceo of home services of america. and ron, thanks for being with us this morning. >> good morning, becky. >> can you tell us a little bit about this new brand and what it will do? >> well, yes. we announced last october that we have actually been thinking about this for a long period of time to create a a global brand in the real estate space using a great name and a world recognized name in berkshire
hathaway and pairing that with home services to create a global real estate brand that will be launched later this year in the second half of 2013, known as berkshire hathaway home services. >> and again, we're interested in seeing why this is taking on. why are you launching it now? >> you know, as more and more of our business is being displayed and searched online, we have lots of companies under the banner of home service america but they're all inpend brands and we continue to see the real estate market move online and they're looking at national sites and, in fact, they're actually looking at global sites to search for real estate or begin the process. we want to have a single point of entry. a single contact and a single brand that can help, you know, idea the place to search for real estate, and that will be berkshire hathaway home services. >> let's talk about where you
see the housing market right now. what's happened? >> well, last year was a very, very clear, definitive evidence of the recovery. the first real serious evidence of recovery, 2011 was really the bottom. last year we saw prices up about 7%, 8% nationally. we saw unit sales up about 10% nationally. clearly it's not an even recovery. there are some markets that are much better than others. and some where the prices have appreciated up higher than others. but we clearly have a recovery. and i think the key issues that we have going forward, we see this, the recovery, continuing in 2013, i will tell you we have a switch from a surplus of inventory to a shortage of inventory, and we have supply, or demand far in excess of supply currently. together with low interest
rates, and affordability at an all-time high, i think we will see sales units grow again in 2013, about 10%. and prices in the high single digits in terms of growth. >> ron, it's richard lefrak. i was wondering what your feeling was about the marginal purchase by institutions and hedge funds speculating in the housing market, not actual users and how that's been affecting the numbers? >> well, richard, that's a great question, and i think, you know, clearly those large purchases of blocks of real estate have gone a long way to, you know, to absorb distressed real estate that has been in the market. and i think they created a simple venue for banks or investors that are or mortgage entities that were looking to unload those in a very quick
way. those investors have improved those properties. they've provided a rental venue for customers and clients that, in many cases, are not credit worthy and cannot get a mortgage and i think those are going to be tremendous investments. there's not a hard asset outthere in housing that can be rebuilt for the price that people are buying these homes at 30% to 40% discount par value. >> in view of how powerful the brand name is, i'm a little surprised that since you announced it last october, you wouldn't really be putting it into the field until the second half of this year. what's taking so long? >> well, you know, we were going through the branding process. we're working with a very large international branding company, wilbur, and we're going through the, you know, the f.e.d. regulations, lots of legal documents that are necessary.
we did purchase a majority interest in the prudential real estate network. we announced that last october. unfortunately, the timing was bad. it was right around the same time as hurricane or sandy storm and tropical storm, and -- but it was really just the announcement. we're working through all of the legalese and the branding and we believe that we'll be very ready to make a major launch of the brand sometime early in the second quarter of this year, with several companies that will join in that brand and continue to build an entire network here in the u.s. and north america, and then move globally. >> ron, we want to thank you very much for joining us. >> thank you, becky. >> coming up, breaking economic data. december retail sales and the ppi hit the tape at 8:30 eastern and the ceo of payroll company
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welcome back to "squawk box." a litany of data hitting the wires. empire manufacturing, a january number. minus 7.78. this comes off of a minus 8.1, slightly revised only minus 7.3. not pretty there. we're expecting basically unchanged. retail sales december headline up half of one%. up 0.5. take out autos up 0.3. take out autos and gas up 0.6. producer prices keys, down 0.2 headline. take out the all-important food and energy up 0.1. year over year headline up 1.3. let's look through the data. if you look at retail sales, that was better than expected by a factor of two on that 0.5, and ex-autos was pretty close, maybe
even 0.1 better than expected. ex-autos and gas a couple of tenths better. some revisions. november's retail sales originally reported unchanged headline is now down 0.1. so i guess if we summarize the data headline inflation a little less, core about right. retail sales picking up, but defense against different issues. you know, for example, what the economy is going to look like in its entirety for the fourth quarter. gdp of course for the first quarter is going to be coming out at the end of this month. we're going in with a minus 45 or so on dow opening new york futures. they've shaved that by about eight or nine points. looks like we're going to slip under 3% in the 30 year and we're testing 180. excuse me, 30 year testing 180 in a ten year so i guess the best cure for all the nervousness about rising rates is just a little slippage in equities. definitely along with mr. ben bernanke comments i guess possibly as well. back to you.
>> okay, rick, thank you. why don't you stay there and get some more commentary on these numbers. steve liesman is here on set. john writing is chief economist at rdq economics. steve a lot of numbers to run through. >> yeah. >> retail sales a little better than expected. bad news is the empire state numbers. >> we've had weakness there, and the weakness remains, and the problem i'm having right now, becky, is the drawing an income chart of the two guys on my side and this big dip that would happen with me in the middle here. i'm incredibly focused on that. >> leverage. >> i'd be part of the mean. vehicle sales had a good month. this is the number that will give us the final tally on the christmas sales. and at least for a moment, settle the debate. that's before the revisions. over what kind of christmas it was. and it's not looking too shabby. 0.4 revision for november. trying to look at the core sales were 0.6. so that's not too bad, either. and then 0.6 as well in
december. the ppi under control, 1.3% year over year. rick said. and maybe just bring in john riding here. john, two things. one is the how good a christmas was it, can we tell from these numbers? and does any of this matter given that the payroll tax hike is going to take effect and we're going to see a decline in consumer spending probably? >> well, it looks like retail sales were fairly decent in the holiday season, especially given expectations that people had coming in, and concern of the fiscal cliff, throwing a big wet blanket over the christmas sales. it didn't look like it happened there. and it didn't look like it happened on a bunch of other economic indicators. so, i'm moderately reassured that the economy came into the end of the year with reasonable momentum. now whether that momentum carries through the payroll tax hike, that's a different question. we estimate that that could add up to a two-thirds of a percent drag on gdp growth this year. and i think it's a year where
consumer spending is not going to lead economic activity. it's going to more be happening in housing, it's going to happen in some rebound from the weather damage in the northeast. and it's going to happen because of the continued move towards u.s. energy independence, as well. those are going to be more drivers of economic activity. with slower consumer spending. >> john, let's put this in context here. i brought along a couple charts here, looking at personal income year over year change has been growing. it was a pretty decent month back in november, the most recent one we have. call it 1.5% to 2% growth in personal income the past couple months. it's been on the upswing. and then you have the savings rate. so somewhere between a decline in the year over year personal income rates and the savings rate is how we're going to absorb this payroll tax increase. what's your best guess? does the savings rate come down? do people stop spending? will there be any income to offset the payroll tax increase? >> i think there will be some
offset in the savori isavings r. temporary tax cuts tend to have less of a positive effect in economic activity when they're in place than permanent tax cuts. so i think part of it will come out of savings, because people will have saved up, as it were, to prepare themselves for this. but not all of it. we are going to have slower consumer spending, i think, in the first half of the year. my point is, it's not going to be the consumer that's going to be driving things. and we are probably going to have a little bit of a pickup in hiring. we think payroll is going to be 175,000 a month. we had an encouraging pickup in wage increases in the december payroll data. that's not a blip. that's the beginning of a new trend. you are going to see better income numbers. i think when you get that december personal income number that's going to look fairly decent number on the wage side giving consumers some cushion to pay those higher payroll taxes. >> and if we should have a decline in inflation or oil
prices or gas prices, that will help, as well. but, john, the question becomes, was what happened on the late in the evening on what was it, december 31st, good policy? should we have cut the payroll tax -- should we have raised the payroll taxes back up? should we have increased taxes on those making more than $400,000 at this time in the economy? >> well, i think good policy wouldn't have cut the payroll tax in the first place, because the payroll tax is, in principle, funding social security. so, it's a little -- income tax. and i don't think that we should have had tax rate increases at all. look, the president's bipartisan commission bowles-simpson was very clear, broaden the base, lower the rates. you ask most economists, they would agree with that in principle. but politics had to drive us to higher marginal rates. and i personally think that was a mistake. >> but i want to catch you up on that one point, which is given
all of the talk about the payroll tax coming back up would you be in a position right now of broadening the base, which would essentially mean more middle-class tax increases? >> well, not necessarily. we could have had lower -- if you look at bowles-simpson, you could have marginal rates come down substantially and raise more income. for example, what better time than to phase out the deductibility of mortgage interest payments when mortgage interest rates are at record lows. >> i understand. >> if you're going to do it, that's the time to start thinking about doing it, and compensate for that with lower rates, which are the inpediment -- high rates are an impediment to economic activity. >> i want to make just one point about the -- what happened, which is that everybody being surprised about the increase in payroll taxes is a reason why we shouldn't be making midnight fiscal deals. make a deal in november, and give people enough time to plan
and know what's going to happen. i think this payroll tax increase -- >> to john's point, if this is something that's supposed to be shoring up social security, don't make the cut to begin with. >> fine. but given that it was done, my point is, given it was done, return it in a way that people can plan for. and don't make each other -- >> you could say that about tax policy -- >> pick up their payroll checks on friday -- >> it's not just that. it's anybody who was wondering about capital gains, they were still trying to figure this out down to the wire. these are all decisions that change, happened december 31st. so you needed to make all of the actions to the policy before the plan was set. >> i agree. it's all true. i'm just saying that if you're going to do it, do it in a way that people can plan for, well ahead of time, so that people know it's coming. >> john riding when you talk about broadening the base, i think there's a misunderstanding. are you talking about broadening the base of taxpayers that are affected or broadening the base of money that you're talking about being able to get at to tax? >> well, personally, i'm in favor of getting rid of the social security taxes, the
income tax systems that currently is and replace it with a flat tax. after all a tax payroll wages starts paying between the employer and the employee at 15.3%. now there's a higher medicare tax so i guess that's 16.2% this year. >> but people mean different things. they don't necessarily mean taxing the middle class. >> getting the money that's held aside. >> when you're only taxing income, i'm -- >> i'm kind of -- >> what do you think it means? >> i think we need to broaden the base when it comes to middle-class because i think people -- >> real estate -- >> talking about. >> the real estate owners get special -- i had somebody telling me the other day that real estate owners in general get -- >> you get to depreciate your asset like in any other investment. you can depreciate your asset. >> but maybe both. >> gentlemen, thank you. steve, john, rick. we'll talk to you all again soon. >> thanks. >> coming up, the adp provides payroll for one in six
americans. ceo carlos rodriguez is making his way to the "squawk" set. we're going to ask him how the company handled the expiration of the payroll tax cut when we return. you are a business pro. executor of efficiency. you can spot an amateur from a mile away... while going shoeless and metal-free in seconds. and you...rent from national. because only national lets you choose any car in the aisle...and go. you can even take a full-size or above, and still pay the mid-size price. now this...will work. [ male announcer ] just like you, business pro. just like you. go national. go like a pro.
services to 80% of the fortune 500 and more than 90% of the fortune 100. so, we all think of this shift in the pay check as something that's already happened. but, in fact, the real deadline is still a month off. >> that's right. february 15th is the official deadline that the irs has for people to make the changes. but all of our systems were updated within 48 hours. >> so every company that you process for -- >> every company that we process for has the right tax table both for federal withholding and also for the social security and remember there's also a new surtax on medicare above $200,000 of 0.9%. >> which of your competitors haven't got their act to the to get this done by february 15th? >> you'd have to ask them. >> no, but do you think most -- do you think most companies right now are paying people properly? >> i think that, you know, companies use on-premise software probably need to get updates and will probably take a little bit longer. people who use outsourcers like us, including some of our competitors have probably updated their systems. now with the new cog based
technology some of the providers that distribute through the cloud have been able to make those updates. >> small businesses are tri trickier? >> small businesses typically use desk top software and that's probably going to take them a little longer. probably why the irs gave folks until february 15th. >> if you think you've skated through, you may not be safe yet, just wait? >> that's correct. that's correct. and i think some people are also kind of making adjustments to their withholdings, they're doing a lot of things to try to offset the decrease that hey may be seeing because of the payroll tax increase. the payroll tax increase affected 100% of u.s. employees. whereas the withholding rates are only affecting less than half a percent. >> they're changing the number of dependents? >> correct. some of the advice -- >> is that good advice? sometimes you say you have less dependents than you really have. i know people who have done this on both sides of this. >> i think it's scary advice. i've seen some of the advice on tv. >> what is your advice? >> my advice is to talk to a tax professional, or to talk to
someone who can really help you work through the numbers because you don't want to have a nasty surprise next april as a result of owing more. >> how do you make up dependents? >> i don't know. but i think people do. >> i think there's really no regulation around w-4 which is the form that you use to adjust the number of dependents that you have, which affect what is taken out in taxes. so really there's a lot of flexibility for people who choose how many dependents in their status, whether they want to be married or single or whatever status they want to put on their taxes. >> i wish it were that easy. >> how many phone calls have you got in since january 1st from either the corporate clients or actually their employees who are calling, saying, you know, i got my pay check and it's wrong or i don't understand this, what's happening here? >> you can imagine we have 600,000 clients. and on december 31st, we had literally dozens of people, including myself, monitoring the situation, to try to figure out what was going to happen. we actually sent out some communications, really over the holiday, over the new year's
day, and also the next two or three days after that, to keep people informed. is we keep our clients informed, who in turn are keeping their employers informed. one of the benefits of using adp, we were able to because of our connections in washington to understand what was happening, be able to react and keep people informed. we had as an example 8,000 hits to our website the next day after the change. >> so the chaos in washington is actually a good thing for adp? you're one of the only companies that can say all this chaos makes us a much better place to come? >> i think complexity and regulation and helping companies deal with regulation complexity is one of adp's specialties. and so -- >> it's gotten a lot more important as washington has gotten more and more disjointed. >> yeah. and i think now besides all the changes with taxes, i think the health care reform starts to get enacted in this year and also in '14 a number of changes as a result have also helped health care reform. it really is helpful to have someone helping you with all the compliance because it's challenging for small companies and for large companies. >> did you have lots of
people -- let me ask you actually a different question. can you make the paycheck -- are we paid by adp? >> yeah, we are. >> i think we are. >> you process our paychecks. >> 24 million people. >> is there a way to make it a little less complicated? is there a way to make it less complicated? most people who look at their paychecks every single week, or every other week, still don't totally understand it. >> i think that's true. and i think why at year end when the focus was really on the withholding taxes which in the end, very few people got affected by that, it was surprising to me how people were not focused on the payroll tax. >> that's what steve was saying. >> and i was, again, being in the business, was a little surprising because i knew it was going to affect every single american and it was going to make a real impact on the pocketbook and i think some of that is a result of complexity. people not really understanding all the taxes that go into their paycheck and how the system actually works. >> also listening to what the politicians are saying which is, we are only going to raise taxes on one half of one percent for the majority of americans you
won't see a thing. and if you listen to anything said on c-span and the coverage that's what every single politician on both sides said. >> -- entitlements. >> i don't know if you can answer this question but this is something i've been thinking about all morning. what is the highest paycheck that you have ever issued? >> i can't answer that. but i can tell you that as technologies evolve, a funny story for you, several years back, it was a long time back, our systems could only a process a check up to $1 million. so every now and then we'd have to issue 20, 30 checks for some of the super bowl stars or some of the folks that are out there that are in acting. so now our systems are all able to handle as many digits as possible. >> and have you -- have you had an eight or nine digit paycheck? >> oh, yes. and by the way, speaking of digits, one of the things we have that's interesting is the amount of bonus payrolls that are being paid definitely has been pulled back slightly from
the normal process because of the increases in the taxes. we saw quite an increase at the end of december in bonus payrolls. >> when you had the nine digit payroll check how many dependents did the guy claim? >> you couldn't -- >> you could do a trillion? >> well, we move $1.3 trillion in money per year through our system because of taxes and also withholdings and payments just to the employees of our clients. so we do move over a trillion dollars a year in funds throughout the country. >> okay. carlos, thank you for being here, and also for processing everyone's pay check at this table. >> you can rest assured that it will be correct. >> we would hope. >> you want to throw an extra zero on there, you can always do that. >> thank you. >> it's all right. when we come back, jim cramer's stocks to watch. and head down to the new york stock exchange right after this.
i guess that's the calm before the storm, again, right? ge's friday, right? >> totally right way to look at it, joe. it's almost like the market needs a nap. len nard does report good numbers. nobody likes it. lululemon, sorry, didn't deliver like we wanted. a lot of people were saying maybe they preannounced the upside, instead they announced to the downside. there's nothing to take us higher today other than dell. >> i don't know, in a world where i just can remember dell -- we're talking about it would be a $25 billion market cap at 15, and then i think of apple at $500 billion-. it's just the world -- we've just seen it happen in the last five years, i guess. >> it's like dell's a small cap company, but it's too big to take pride in. but it's not big enough versus apple. i think one of the themes about
this market did apple get out of whack or did dell get out of whack. it's almost as if everything seemed to have lost momentum in the tech world. but the people who run the tech companies think their companies should be valued higher. >> yeah. jim, are you betting a dell deal happens? we've been talking about it all morning. my sense is it's a long ways off and it's a hard deal to get done. >> i think the journal made some good points this morning that you have offshore cash that may not work. look, when the stock was at 9, you would expect it to deal at 12. but the stock just goes bonkers, because the tedeal gets leaked. i think it's going to be talked about, kicked around. the stock goes down to 10. everybody's going to buy it again because they think there's something going on. you would like to see a turn in dell's business. we certainly haven't seen that. >> what are we going to do with lance armstrong, jim? >> oh, boy, i've known thomas
wizell for years. i just think this is a national disgrace category that seems to grow by the day. >> i don't know how to -- i don't know whether to pay attention or just not pay attention. i don't know. it's just -- there's a difference between sort of -- i don't know, like even clemens. i don't know what finally happened there. but i just don't have the same -- it's just the poor teammates that he excoriated -- i don't know, it's just the pure vitriol that he used during the -- i don't see how this can rehabilitate someone. >> i'm in total agreement. look, tiger woods came back. but that's very different. that was personal. this is a whole group of people that -- this is a corporation where the top guy, you know -- >> the whole cancer thing, it's just -- you can't make this
stuff up. it doesn't mean we're not going to watch it on own, we're all going to find where that channel is now, right? >> like comcast -- >> they're going to stream the entire thing over the internet for those people who cannot have access to the channels. >> like the success with herbalife, you stream it on the web and they'll come. >> thank you, jim. >> thank you. when we come back, our guest host this morning, we'll give them the last word. squawk will be right back. tomorrow, reports from major financials, including jpmorgan and goldman sachs. we'll bring you the numbers, and expert analysis. plus, a new app that's changing the game for magazine subscriptions. squawk starts tomorrow at 6:00 a.m. eastern. what are you doing?
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